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Gabelli Dividend & Income Trust: A New Safe 5.375% Preferred Stock IPO



Introduction

Our goal is to present to you our IPO analysis for every new fixed-income security that enters the market and to find out if there is any trading potential. In this article, we want to shed light on the newest preferred stock issued by Gabelli Dividend & Income Trust (GDV). Even though the product may not be of interest to us and our financial objectives, it definitely is worth taking a look at.

The New Issue

Before we submerge into our brief analysis, here is a link to the 497 filing by Gabelli Dividend & Income Trust – the prospectus. (Source: SEC.gov)

For a total of 2 million shares issued, the total gross proceeds to the company are $50 million. You can find some relevant information about the new preferred stock in the table below:



Source: Author’s spreadsheet

Gabelli Dividend & Income Trust 5.375% Series H Cumulative Preferred Shares (GDV.PH) pays a fixed dividend at a rate of 5.375% and has a par value of $25. The new preferred stock is not rated by Standard & Poor’s but is anticipated to be rated Aa-3 by Moody’s Investors Service. The new IPO is callable as of 06/07/2024, and it currently trades above its par value at a price of $25.29. This translates into a 5.31 current yield and a 5.12% yield-to-call.

Here is the product’s Yield-to-Call curve:



Source: Author’s spreadsheet

The Company

The Gabelli Dividend & Income Trust, or the Fund, is a diversified, closed-end management investment company whose objective is to provide a high level of total return.

Under normal market conditions, the Fund invests at least 80% of its assets in dividend paying or other income producing securities. In addition, under normal market conditions, at least 50% of the Fund’s assets will consist of dividend paying equity securities. In making stock selections, the Fund’s investment adviser looks for securities that have a superior yield and capital gains potential.

Source: Gabelli.com | The Gabelli Dividend & Income Trust

Below, you can see a price chart of the common stock, GDV:



Source: Tradingview.com

While the text above provides us with a stepping stone in terms of information about the fund, it means nothing without looking at some numbers:



Source: CEFData.com

The fund’s investment advisor is Gabelli Funds, LLC. Other closed-end funds from the same investment advisory are: GAB, GLU, GCV, GGZ, BCV, ECF, GGO, GGT, GUT, GDL, GRX, GNT, and GGN.

The Gabelli Family

The chart below shows some relevant information about the other 23 preferred stocks issued by The Gabelli Funds.



Source: Author’s database

To get a better idea of where the new preferred stock stands in comparison with its relative peer group, you can see the chart below. It presents the preferred stocks from the group by their % of par and current yield.



Source: Author’s database

An observation could be made that almost all of these securities trade at a current yield between 5.00% and 5.50%, which makes the newly issued GDV.PH fairly priced with the rest of the Gabelli preferred stocks. Now let’s exclude those with a call risk, which means I’ll leave only these issues with a positive Yield-to-Call.



Source: Author’s database

The picture is pretty much the same. Most of the issues trade close to their par and return between 5% and 5.5% yearly. I want to add one more point of view, a chart by Years-to-Call and Yield-to-Call with the securities that have not reached their call date yet. In other words, the yield curve in the peer group by their Yield-to-Worst:



Source: Author’s database

In addition, in the following chart you can see a comparison between the GDV’s other preferred stocks and the fixed-income securities benchmark, the iShares U.S. Preferred Stock ETF (PFF).



Source: Tradingview.com

Almost no correlation between GDV.PD, GDV.PG, and GDV.PA versus PFF. GDV.PA and GDV.PD totally outperform the benchmark, while GDV.PG is a bit closer to the ETF but it also performs far better. As it can be seen, during the massive sell-off at the end of the last year, PFF had lost more than 10% of its value, while GDV.PG had lost 5% and the A and D preferred even managed to stay flat!

Sector Comparison

The chart below contains all preferred stocks in the Closed-End Fund – Equity sector (according to Finviz.com), regardless of their type of dividend rate, by their market price as a % of par value and their current yield. It must be remarked that this is again only Gabelli funds.



Source: Author’s database

Asset Coverage Ratio

Pursuant to the 1940 Act, the Fund generally will not be permitted to declare any dividend, or declare any other distribution, upon any outstanding common shares, purchase any common shares or issue preferred shares, unless, in every such case, all preferred shares issued by the Fund have at the time of declaration of any such dividend or distribution or at the time of any such purchase or issuance an asset coverage of at least 200% (“1940 Act Asset Coverage Requirement”) after deducting the amount of such dividend, distribution, or purchase price, as the case may be. As of the date of this Prospectus Supplement, all of the Fund’s outstanding preferred shares are expected to have asset coverage on the date of issuance of the Series H Preferred Shares of approximately 404%. In addition to the 1940 Act Asset Coverage Requirement, the Fund is subject to certain restrictions on investments imposed by guidelines of one or more rating agencies that have issued ratings for the Existing Preferred Shares and are expected to issue a rating for the Series H Preferred Shares.

Source: 497 Filing by Gabelli Dividend & Income Trust

Use of Proceeds

The Fund estimates the total net proceeds of the offering to be $48,200,000, based on the public offering price of $25.00 per share and after deduction of the underwriting discounts and commissions and estimated offering expenses payable by us.

The Fund intends to use net proceeds from this offering to redeem a portion of the Fund’s outstanding Series E Auction Rate Preferred Shares. The Fund intends to call a portion of the Series E Auction Rate Preferred Shares for redemption within three months of the completion of this offering. Pending such redemption, the proceeds will be held in high quality short term debt securities and similar instruments.

Source: 497 Filing by Gabelli Dividend & Income Trust

Note: The Series E Auction Rate Preferred Shares (4,000 shares with liquidation preference $25,000 per share), along with:

  • 3,600 shares of Series B Auction Market Cumulative Preferred Shares, liquidation preference $25,000 per share, and
  • 4,320 shares of Series C Auction Market Cumulative Preferred Shares, liquidation preference $25,000 per share,

are existing private preferred shares of the company.

Addition to the iShares U.S. Preferred Stock ETF

With the current market capitalization of the new issue of around $50 million, it cannot be an addition to the iShares U.S. Preferred Stock ETF (PFF).

Conclusion

As fixed-income traders, we follow every preferred stock or baby bond that is listed on the stock exchange. As such, GDV.PH is on exception, and we share with the public the homework we always do. It is not necessary for the IPO to be an arbitrage and a bargain, but in many cases, the new security happens to be better than the ones already trading on the market.

I believe GDV.PH is a good one. An Aa-3 rating by Moody’s is no joke (an analog for AA- by the S&P). The fund is slightly leveraged, only 22%, and with an asset coverage of more than 400%, the preferred shareholders can feel more than safe with this preferred stock. Further, this one, except with the high quality, comes with a nice return of Yield-to-Worst of 5.12%. As we saw from the historical price chart and the comparison with the PFF, the GDV preferred stocks have very low volatility and they hardly may make you feel threatened. With the approaching lower interest rates, I think GDV.PH is an excellent preferred stock IPO to balance the risk profile of the portfolio.

Trade With Beta

Coverage of Initial Public Offerings is only one segment of our marketplace. For early access to such research and other more in-depth investment ideas, I invite you to join us at ‘Trade With Beta.’

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Aprio Cloud and Jirav Partner to Amplify Accounting Services with Real-time Dashboards, Reports and Forecasting


Aprio Cloud and Jirav Partner to Amplify Accounting Services with Real-time Dashboards, Reports and Forecasting – Global Investing Today – EIN News

























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Why Luckin Coffee Stock Jumped 10% Today

What happened

Shares of recent IPO Luckin Coffee (NASDAQ:LK) are surging — up nearly 10% in early morning trading and still up a healthy 8.6% as of noon EDT.

Why? As Barron’s reported over the weekend, “two sovereign-wealth funds and an American financial giant recently said they are large shareholders in the so-called Starbucks of China.”

Coffee with a smiley face carved out in its foam

Image source: Getty Images.

So what

According to the magazine, Caron Investments — a subsidiary of Singaporean sovereign wealth fund GIC Private Ltd. — has revealed that in 2018, before Luckin’s IPO on the Nasdaq, it bought $45 million worth of its preferred stock, which has since been converted into common shares constituting a 13% stake in the company. Combined with a 0.6% stake separately owned by GIC Private, the sovereign wealth fund now owns more than 13.6% of the coffee house chain.

Barron’s also noted that the Qatar Investment Authority, another sovereign wealth fund, revealed Friday that it owns an 8.8% stake in Luckin; and Capital Research Global Investors, part of the Los Angeles based Capital Group Companies, owns 15.6% of Luckin.

Now what

Add it all up, and these three entities control 38% of Luckin. But should this really make a difference to individual investors who own smaller stakes?

After all, someone has to own those shares. Sure, the fact that ownership is heavily concentrated among three entities could become significant if one or more of them decided to try to buy more shares (to secure control over the company). But it can also become significant if one or more of these investors loses confidence and begins selling its stake, flooding the market with unwanted shares.

The rewards and risks from this revelation seem pretty equally balanced. They certainly don’t add up to any compelling reason to buy Luckin stock today.

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Cannabis REIT Innovative Industrial Properties Raises Dividend By 33%

Shares of Innovative Industrial Properties Inc (NYSE: IIPR) are trading higher on Monday after the real estate investment trust said Friday it will hike its quarterly dividend yield.

What Happened

Innovative Industrial Properties said it will pay a second-quarter dividend of 60 cents per share, which represents an increase of 33% from the previous one. The dividend also went up by 140% from the second quarter of 2018. The dividends are payable on July 15 to stockholders of record on June 28.

This represents the ninth consecutive quarterly dividend the REIT is paying since its IPO in December 2016.

Need more cannabis news? Check out all of our coverage here.

In addition, Innovative Industrial Properties’ board declared a regular quarterly dividend of $0.5625 per share of its 9% Series A Cumulative Redeemable Preferred Stock. 

Why It’s Important

Innovative Industrial Properties is one of the largest real estate companies catering to the U.S. cannabis industry. In the last couple of months, the REIT has expanded its presence in Pennsylvania.

In April, the company acquired a 51,000 square foot property in Pittsburgh for which it had signed a long-term lease agreement with Maitri Genetics. In May, it acquired two buildings in Saxton with a total footage of 266,000 square feet and leased it to Green Leaf Medical.

The stock traded higher by 7.6% to $116.75 per share at time of publication.

Related Links:

Neptune Subsidiary Receives License Amendment Approval From Health Canada

The Week In Cannabis: Colorado Hits $1B In Sales, Harborside In Canada, Kroger Embraces CBD, And More

© 2019 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

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Luckin Coffee (NASDAQ: LK) is Undervalued AF

Its IPO came out of the gate strong, but by the end of the day, it began selling off in a major way.

Lucking Coffee (NASDAQ: LK) went from a high of $25.96, on it first day of trading, to a low of $13.71 in just 15 days.

Not so great for first-day buyers, but an excellent opportunity for bargain hunters, as you can see in the chart above.

Certainly at $13.71, the stock was a bargain. It’s actually still a bargain today.

Dubbed the “Starbucks of China,” Luckin is the second largest coffee shop chain in China, and its pace of growth far exceeds that of Starbucks.

The company also has some pretty high-profile investors that have gone in – big.

As reported by Barrons, two sovereign-wealth funds and an American financial giant recently said they are large shareholders.

Carob Investments, a unit of Singapore’s sovereign-wealth fund GIC Private Ltd., paid a total of $45 million in 2018 for preferred Luckin stock. After the initial public offering, those preferred shares were converted into 44,256,000 class B Luckin shares, a 13.04% stake in the company, according to a form GIC Private filed with the Securities and Exchange Commission this month. GIC Private itself owns 250,000 Luckin ADSs, in addition to Luckin shares owned by Carob. Overall, it has a 13.63% stake in Luckin.

The Qatar Investment Authority disclosed on Friday that it owned 3.25 million Luckin ADSs, an 8.81% stake. The authority isn’t listed in Luckin’s preliminary prospectus as a pre-IPO investor. Qatar Investment didn’t immediately respond to a request for comment.

Capital Group unit Capital Research Global Investors disclosed on Monday that it owned 5,789,944 Luckin ADSs, a 15.6% stake. Capital Group, of Los Angeles, didn’t immediately respond to a request for comment.

Overall, Wall Street is starting to take a liking to LK, with price targets ranging from $22 to $32 a share. On the high end, you’re looking at a potential gain of 66.4%.

I personally think LK is undervalued, with most estimates underestimating how rapidly Luckin can grow, and how much market share it can capture in such a short amount of time. Although I don’t believe comparing Luckin to Starbucks is a completely accurate assessment, as Luckin is more of a “pick-up coffee” spot while Starbucks is your conventional chain coffee shop.

That being said, Luckin is moving aggressively to become the number one seller of coffee in China. Whether or not that happens is still up in the air. But either way, at number 2, in one of the fastest-growing coffee markets in the world – boasting a population in excess of 1 billion – Luckin should not be ignored or trivialized.

The stock is currently trading below $20 a share. By the end of the year, Luckin should not be trading for any less than $27 a share.

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More Investors Reveal Stakes in Luckin Coffee, the Starbucks of China – Barron’s


Photograph by Fred Dufour/AFP/Getty Images

Big investors continue to disclose large positions in
Luckin Coffee
,
the Chinese coffee chain that went public in the U.S. on May 17. Two sovereign-wealth funds and an American financial giant recently said they are large shareholders in the so-called
Starbucks

of China.

Carob Investments, a unit of Singapore’s sovereign-wealth fund GIC Private Ltd., paid a total of $45 million in 2018 for preferred Luckin stock. After the initial public offering, those preferred shares were converted into 44,256,000 class B Luckin shares, a 13.04% stake in the company, according to a form GIC Private filed with the Securities and Exchange Commission this month.

Luckin offered 33 million American depositary shares (ADS) in its May IPO. The ADSs were priced at $17 each, and each ADS represents eight class A Luckin shares. Pre-IPO Luckin investors own class B shares, which carry 10 votes each, while the class A shares that underlie the ADSs carry one vote each. Class B shares may be converted into class A shares at any time.

Read More: China’s Luckin Coffee Stock Draws Favorable Analyst Ratings

Carob has done well with its investment. The $45 million it invested in Luckin stock last year is now worth $106.4 million based on the ADS closing price of $19.23 on Friday.

GIC Private didn’t immediately respond to a request for comment on its Luckin stake. GIC Private itself owns 250,000 Luckin ADSs, in addition to Luckin shares owned by Carob. Overall, it has a 13.63% stake in Luckin.

Editor’s Choice

The Qatar Investment Authority disclosed on Friday that it owned 3.25 million Luckin ADSs, an 8.81% stake. The authority isn’t listed in Luckin’s preliminary prospectus as a pre-IPO investor. Qatar Investment didn’t immediately respond to a request for comment.

Capital Group unit Capital Research Global Investors disclosed on Monday that it owned 5,789,944 Luckin ADSs, a 15.6% stake. Capital Group, of Los Angeles, didn’t immediately respond to a request for comment.

Barron’s reported earlier this month that two hedge funds had disclosed large positions in Luckin stock.

Write to Ed Lin at edward.lin@barrons.com and follow @BarronsEdLin.

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The red-hot IPO market this year could mean bad news for future stock returns – CNBC

Beyond Meat CEO Ethan Brown (C) celebrates with guests after ringing the opening bell at Nasdaq MarketSite, May 2, 2019 in New York City.

Drew Angerer | Getty Images

The red-hot market for new public companies in 2019 like Beyond Meat and Chewy could spell bad news for the broader stock market in the year ahead.

An uptick in IPO activity is correlated with a downturn in S&P 500 returns over the following 12 months, Bernstein equity strategist Noah Weisberger warned clients in a note on Monday. That’s because companies looking to go public tend to wait to take advantage of what they perceive to be the market’s richest valuations, at or near levels many investors feel the market many be overpriced, the equity strategist told clients.

It’s also because of “the notion that incremental IPO supply is difficult for the market to digest, suppressing forward returns,” Weisberger wrote. “IPO activity is (mildly) cyclical, as management teams take the opportunity to go public while being buoyed by favorable economic conditions.”

“Interestingly, the economic expansion which began in late 2016 was not matched by a pickup in IPO activity until early 2019, suggesting that this current wave of IPOs may simply be catching up to growth,” he added.

As the Bernstein chart below illustrates, more IPO activity is negative related to future S&P 500 returns. More IPO activity in the prior 12 months tends to be an indicator of market losses to come.

“Said differently,” Weisberger said. “IPO activity leads and is negatively correlated to market returns” with a value of -0.3.

A recent wave of IPOs has taken Wall Street by storm, with names like meat-alternative company Beyond Meat, online pet retailer Chewy and cybersecurity firm Crowdstrike up 163%, 78% and 70%, respectively, during their first day of trading.

The Renaissance Capital IPO ETF, a basket of the 60 or so most recent large IPOs, is up 35% this year, more than twice the performance of the S&P 500.

“Looking back to the mid-1980s, IPO activity has had a clear ebb and flow. While the late 1990s occupy a special place in market history, IPO activity was outsized all decade long, peaking in early 2000,” Weisberger wrote.

But while the meteoric rise of stocks representing beefless burgers and Fido’s squeaker toys has made a number of insiders and shrewd investors rich, some are a bit more concerned. Many of the so-called IPO unicorns rely on expectations for their rapid growth for their lofty valuations, a bet that could backfire if the market sours as some worry.

Today’s IPOs are essentially, a “very bright private equity crowd desperately hitting a fleeting late cycle bid after missing that bid in Q4 and looking down the barrel of a 20 percent U.S. equity market drawdown,” Larry McDonald of the Bear Traps Report told CNBC in March.

“They should have done these deals all last year, and they put it off,” he added at the time, noting that the Federal Reserve later swooped in to save the day by signaling a pause in its cycle of rate hikes. But that insurance may not always be there.

Economists and investors are preparing for Fed’s next policy move announcement later this week, eager to see if the central bank telegraphs a rate cut amid weakening economic data worldwide. Some recession indicators, like the partial inversion of the yield curve, have also spurred market angst and prompted some to put more money in safer assets like bonds and gold.

“The relationship between IPO activity and forward returns was especially pronounced in the dot-com bubble and again in mid-2014,” Weisberger added. “Interestingly, there was not as dramatic an uptick in IPO activity during the lead-up to the Global Financial Crisis, although some notable transactions such as Blackstone’s IPO did occur at that time.”

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The Hot IPO You Might Have Overlooked: Term Sheet – Fortune


While we all gave our undivided attention to flashy IPOs like Uber and Lyft, many overlooked the public market debut of cloud-based cybersecurity company CrowdStrike. You’ve probably heard of it without realizing — CrowdStrike was the company that discovered the Democratic National Committee breach by Russia amid the U.S. presidential election.

My colleague Robert Hackett and I met with CrowdStrike CEO George Kurtz the day after his company’s IPO. It had been a big day for Kurtz and his team after the stock surged and made it the second most valuable U.S.-based cybersecurity company on the public markets today (only $19.5 billion Palo Alto Networks tops it.)

Hackett notes that the most interesting thing about Kurtz is his doggedness. “Here was a man dead-set: Cloud at all costs. Platform or nothing. IPO or bust. Kurtz has been describing his business as ‘the Salesforce of cybersecurity’ since I first met him in 2015, and that’s precisely how he described it when I caught up with him after his company’s ravenously received initial public offering in the middle of the week.”

And there’s a reason Kurtz uses the Salesforce comparison. When we met with him, he said something that resonated: “The companies that bring a consumerized experience to the enterprise will win.” Read more.

‘IRR GOALS:’ This chart was making the rounds on Twitter this weekend showing aggregated fund performance sorted by fund manager. Union Square Ventures showed nearly 60% internal rate of return (IRR) across eight funds.

The tweets were endless. Alexis Ohanian with: “Respect. @fredwilson and team with IRR goals.” Paul Graham with “Union Square Ventures proves that in the venture business, nice guys don’t finish last. In fact rather the opposite.” And Paul Kedrosky with: “Incredible venture performance numbers as of 12/31/18 from Union Square, not that it should come as a surprise.”

Wilson commented to say he has never seen his firm’s fund performance aggregated into a single number. “We don’t look at it that way at USV,” he said. And added, “To be clear, we look at each fund separately. Not as an aggregated entity. I can see why LPs would look at performance aggregated by manager, but we don’t.”

Regardless, it’s interesting to see fund performance in this format. Looks like Summit Partners has also fared well.

GOLDMAN SACHS STRATEGY SHAKE-UP: Goldman Sachs is upping its private equity ante by building a mini-Blackstone Group internally, according to The WSJ. The firm is reportedly pulling together four separate units that invest in private companies, creating new unit and planning a fundraising blitz. Why? Under the leadership of CEO David Solomon, Goldman is trying to grow the kind of steady, income-generating business that investors like. The unit is likely to have approximately $140 billion in assets, according to the WSJ. Read more.

THIS JUST IN: Sotheby’s auction house is being taken private for $57 per share in a cash deal valued at $3.7 billion. The buyer is BidFair USA, an entity wholly owned by media and telecom entrepreneur as well as art collector, Patrick Drahi. Sotheby’s will return to private ownership after 31 years as a public company traded on the New York Stock Exchange.

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“ipo” – Google News


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Alibaba proposes share split ahead of reported $20B Hong Kong IPO – TechCrunch

Alibaba is being heavily linked with a public listing in Hong Kong, which could reportedly happen in Q3 and raise up to $20 billion. The firm is keeping quiet on those rumors, but it did let slip a major hint after it announced plans for a stock split.

Filings uploaded today (but originally released Friday) announced a proposal for a one-to-eight stock split.

Shareholders are invited to vote on the offer ahead of the company’s annual general meeting on July 15. The initiative has already been approved by Alibaba’s board, which is recommending that shareholders follow suit.

The particularly interesting part of the filing is where Alibaba explains the reasons behind the stock split.

“The Board of Directors is proposing the Share Subdivision to increase the flexibility for the Company in future capital market activities. Among other reasons, the one-to-eight share subdivision will increase the number of shares available for issuance at a lower per share price, and the Board of Directors believes that this will increase flexibility in the Company’s capital raising activities, including the issuance of new shares,” the filing reads.

That would appear to clear the way for a second listing for the company, which went public in a record U.S. IPO that raised more than $20 billion in 2014.

Alibaba declined to provide further comment when we asked.

Reports last week suggested that the Chinese e-commerce giant has already filed initial paperwork for the listing, which would become the largest such float on the Hong Kong stock exchange. The city has become a destination for Chinese tech IPOs since relaxed listing rules came into effect two years ago. Ironically, a lack of flexibility was cited as a key reason why Alibaba picked the U.S. over Hong Kong for its 2014 listing.

Tech firms that have gone public in Hong Kong include Razer, Xiaomi, Tencent’s China Literature and selfie app company Meitu. Despite the hype, some have been guarded of Hong Kong’s suitability for tech firms, which are often not profitable when listing. Indeed, Razer CEO Min-Liang Tan previously warned that “the U.S. [public markets] are probably more cognizant of tech companies” than Hong Kong retail investors.

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“ipo” – Google News


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Priam Properties sets terms for IPO, to raise up to $180 million – MarketWatch

Priam Properties Inc.

PRMI, +0.00%

set terms Monday for its initial public offering, in which the Nashville-based real estate investment trust expects to raise up to $180 million and be valued at about $233.51 million. The newly formed REIT, which is focused on acquiring and owning multi-tenant office urban properties in the Midwest and Southeast, with a particular focus on millennials, is offering 9 million shares, with the IPO expected to price between $18 and $20 a share. The stock is expected to list on the New York Stock Exchange under the ticker symbol “PRMI.” If the underwriters, BofA Merrill Lynch, Baird and RBC Capital Markets, exercise all options to buy up to 1.35 million additional shares, Priam could raise up to $207 million. After the IPO, the company will have 11.68 million shares outstanding. The company is looking to go public at a time that Renaissance IPO ETF

IPO, +0.83%

has gained 2.3% over the past three months, while the SPDR Real Estate Select Sector ETF

XLRE, +1.09%

has tacked on 6.4% and the S&P 500

SPX, +0.09%

has advanced 2.3%.

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“ipo” – Google News


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